[Code of Federal Regulations]
[Title 17, Volume 1]
[Revised as of April 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR31.7]

[Page 354-355]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 31_LEVERAGE TRANSACTIONS--Table of Contents
 
Sec.  31.7  Maintenance of minimum financial, cover and segregation 
requirements by leverage transaction merchants.

    (a) Each person registered as a leverage transaction merchant or who 
files an application for registration as a leverage transaction 
merchant, who knows or should have known that its adjusted net capital 
at any time is less than the minimum required by Sec.  31.9, or that its 
cover at any time is less than the minimum required by Sec.  31.8, or 
that the amount of leverage customer funds in segregation is less than 
is required by Sec.  31.12 or by the capital, cover or segregation rules 
of any designated self-regulatory organization to which such person is 
subject, if any, must:
    (1) Give telegraphic notice as set forth in Sec.  1.12(g) of this 
chapter that such applicant's or registrant's adjusted net capital is 
less than is required by Sec.  31.9, or its cover is less than is 
required by Sec.  31.8, or the amount of leverage customer funds in 
segregation is less than is required by Sec.  31.12 or by such other 
capital, cover or segregation rule, identifying the applicable capital, 
cover or segregation rule. This notice must be given within 24 hours 
after such applicant or registrant knows or should have known that its 
adjusted net capital or its cover or the amount of leverage customer 
funds in segregation is less than is required by any of the aforesaid 
rules to which such applicant or registrant is subject; and
    (2) Within 24 hours after giving such notice file a statement of 
financial condition, a statement of the computation of the minimum 
capital requirements pursuant to Sec.  31.9 (computed in accordance with 
the applicable capital rule), a schedule of coverage requirements and 
coverage provided, and a schedule of segregation requirements and funds 
on deposit in segregation, all as of the date such applicant's or 
registrant's adjusted net capital or its cover or the amount of leverage 
customer funds in segregation became less than the minimum required.
    (b) Each person registered as a leverage transaction merchant, or 
who files an application for registration as a leverage transaction 
merchant, who knows or should have known that its adjusted net capital 
at any time is less than 120 percent of the amount required by Sec.  
31.9 must file written notice to that effect as set forth in Sec.  
1.12(g) of this chapter within five business days of such event. Such 
applicant or registrant must also file a Form 2-FR or such other 
financial statement designated by the Commission and/or the designated 
self-regulatory organization, if any, as of the close of business for 
the month during which such event takes place and as of the close of 
business for each month thereafter until three successive months have 
elapsed

[[Page 355]]

during which the applicant's or registrant's adjusted net capital is at 
all times equal to or in excess of the minimums set forth in this 
paragraph (b). Each financial report required by this paragraph (b) must 
be filed within 30 calendar days after the end of the month for which 
such report is being made.
    (c) The requirements of Sec. Sec.  1.12(c), 1.12(d), 1.12(e) and 
1.12(g) of this chapter shall apply to registered leverage transaction 
merchants and to persons who have applied for registration as leverage 
transaction merchants, as if in those paragraphs the term ``leverage 
transaction merchant or applicant therefor'' were substituted for the 
phrase ``applicant or registrant.''

(Secs. 8a(5) and 19 of the Commodity Exchange Act, as amended, 7 U.S.C. 
12a(5) and 23 (1982))

[49 FR 5530, Feb. 13, 1984, as amended at 50 FR 28, Jan. 2, 1985; 54 FR 
41079, Oct. 5, 1989]